Best Affirms Markel Int’l., Lloyd’s Syndicate 3000 Ratings

A.M. Best has affirmed the financial strength ratings of ‘A’ (Excellent) and issuer credit ratings of “a+” of UK-based Markel International Insurance Company Limited (MIICL) and Lloyd’s Syndicate 3000.

The outlook for MIICL’s ratings remains stable, and the outlook for syndicate 3000’s ratings remains positive.

MIICL’s ultimate parent company is the Markel Corporation, which is also the ultimate parent company of syndicate 3000’s managing agent, Markel Syndicate Management Ltd, and its capital provider, Markel Capital Limited. Best noted that “MIICL and the syndicate account for over one-third of the Markel group’s gross premium income and provide the group with access to the UK and London markets as well as international business.”

The report explained that “MIICL’s ratings reflect the continued support of Markel and the company’s strategic importance to the Markel group. Markel has contributed capital of approximately $200 million since acquiring the company. In addition, MIICL benefits from excellent stand-alone risk-adjusted capitalization, strong operating performance and a good business profile as a specialist underwriter of marine, professional liability and specialty insurance in the UK and London markets.

“MIICL has a strong historical underwriting performance, demonstrated by a five-year (2009-2013) average combined ratio of 88 percent, despite the impact of exceptionally high catastrophe losses in 2011. In 2013, MIICL reported a profit before tax and equalization reserve movement of $150.4 million (compared to $110.8 million in 2012).”

Best also explained that “MIICL underwrites a well-diversified portfolio and leads over 50 percent of its business. In addition to the UK and London market business, the company derives approximately 10 percent of gross written premiums from Europe through branch offices in Spain, Sweden and the Netherlands. Of its principal lines of business, marine represented 28 percent of gross written premiums in 2013, retail 19 percent, professional and financial risks 14 percent, specialty 18 percent and trade credit 6 percent.”

The ratings of Lloyd’s Syndicate 3000 “reflect the financial strength of Lloyd’s, which underpins the security of all Lloyd’s syndicates,” Best said, adding that it “believes the syndicate’s financial flexibility is enhanced by the continued support of Markel.

“On an annually accounted basis, following two years of catastrophe-affected underwriting performance in 2010 and 2011, the syndicate has achieved excellent performances in 2012 and 2013, reflecting the more normal catastrophe experience for those years. A good level of reserve releases and a solid investment return contributed to the operating performance in each year.”

The report described Syndicate 3000 as having “a good business profile within the Lloyd’s market and leads over 40 percent of its business. The syndicate’s capacity for the 2014 year of account has been increased to £500 million [$824 million] from £340 million [$560 million] for 2013, demonstrating Markel’s continued commitment to syndicate 3000 as its main underwriting center for marine and large US property risks written in the London market.”

In conclusion Best said: “Positive rating actions in respect of MIICL are considered unlikely in the near future; however, an unexpected weak operating performance or a reduction in the level of parental support could lead to negative pressure on the company’s ratings.

“A factor that may lead to positive or negative rating actions for the syndicate is a change in the rating of the Lloyd’s market, which currently has an FSR of ‘A’ (Excellent) and an ICR of “a+”, both with a positive outlook.”